Question

Calculating Interest Rates Solve for the unknown interest rate in each of the following:

Present Value Years Future Value

189 4 287

410 8 887

51,700 14 152,184

21,400 27 538,600

Answer 1

1.Information provided:

Present value= $189

Time= 4 years

Future value= $287

The interest rate is calculated by entering the below in a financial calculator:

PV= -189

N= 4

FV= 287

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 11.

Therefore, the interest rate is 11%.

2. Information provided:

Present value= $410

Time= 8 years

Future value= $887

The interest rate is calculated by entering the below in a financial calculator:

PV= -410

N= 8

FV= 887

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 10.13.

Therefore, the interest rate is 10.13%.

3. Information provided:

Present value= $51,700

Time= 14 years

Future value= $152,184

The interest rate is calculated by entering the below in a financial calculator:

PV= -51,700

N= 14

FV= 152,184

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 8.02.

Therefore, the interest rate is 8.02%.

4. Information provided:

Present value= $21,400

Time= 27 years

Future value= $538,600

The interest rate is calculated by entering the below in a financial calculator:

PV= -21,400

N= 27

FV= 538,600

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 12.69.

Therefore, the interest rate is 12.69%.

In case of any query, kindly comment on the solution.